What You Can Expect From This Article
· An engaging exploration of why people play the lottery, using a captivating fisherman's tale as a metaphor
· Insights into the psychology behind gambling and lottery participation
· An introduction to key concepts in decision-making theory and probability
· A balanced look at the rational and emotional factors influencing our choices
· Thought-provoking reflections on the value of everyday experiences versus the pursuit of life-changing windfalls
Practical Real-Life Lessons You'll Learn
1. How to apply decision-making frameworks to evaluate risks and rewards in uncertain situations
2. Techniques for recognizing and mitigating common cognitive biases that affect our judgment
3. Strategies for finding balance between pursuing ambitious goals and appreciating everyday joys
In a bustling coastal town on the periphery of society, there lived a fisherman named Jack. Every day, Jack would cast his net into the sea, hoping for a bountiful catch. Most days, he'd haul in enough fish to feed his family and make a modest living. But Jack always dreamed of more.
One day, a mysterious old sailor approached Jack at the docks. With a glint in his eye, and a wrinkle in his brow, he leaned in close, "This rod," the old man whispered, "has the power to catch the legendary golden fish. One scale from this fish is worth more than a lifetime of ordinary catches. But be warned, the golden fish is elusive and appears only once in a blue moon."
Excited by the prospect of untold riches, Jack eagerly traded his trusty net for the magical rod. Day after day, he cast the rod into the sea, ignoring the schools of ordinary fish swimming by. His family grew hungry, and his pockets empty, but Jack couldn't let go of the dream of catching the golden fish.
As Jack's obsession with the golden fish grew, so did his neglect of the everyday opportunities swimming right before his eyes...
Variations on this tale of seduction and promise are as old as time itself. In some ways, Jack's pursuit of the golden fish mirrors our modern fascination with playing the lottery. The allure of bountiful prosperity and life-changing wealth; the dream of escaping the ordinary – these are the siren songs that draw millions to buy lottery tickets week after week. But is this pursuit rational? Or are we, like Jack, neglecting the schools of fish swimming right before our eyes?
Appreciating human psychology and probability helps us understand why people play lotto/gamble/pursue ‘big catches’, and what it says about our relationship with chance, hope, and the allure of elusive jackpots.
The Bernoulli Principle: A Lesson in Expected Utility
Have you ever wondered exactly what to do at any given time? Well it turns out that there is a mathematical answer. Back in the 18th century, a Swiss polymath by the name of Daniel Bernoulli changed the world forever with his work on what we now recognize as 'expected utility theory'. Bernoulli essentially taught us how to behave in situations where the outcome is uncertain. It's like he gave us a compass to navigate the stormy seas of chance and probability.
In basic terms, expected utility theory is a framework for decision-making under uncertainty. It suggests that when faced with multiple options, a rational decision-maker should choose the option that maximizes their expected utility - the sum of the probability-weighted outcomes for each
Consider the following simple coin flip gambling scenario:
Imagine you're offered a chance to play a game where you flip a fair coin. Here are the rules:
1. It costs $10 to play.
2. If the coin lands on heads, you win $25.
3. If it lands on tails, you win nothing.
Should you play???
Option 1: Play the game
· Probability of heads: 50% (0.5)
· Probability of tails: 50% (0.5)
· Utility of winning: $25 - $10 (cost to play) = $15
· Utility of losing: -$10 (you lose your bet)
Expected Utility = (0.5 × $15) + (0.5 × -$10) = $7.50 - $5 = $2.50
Option 2: Don't play
· Utility: $0 (you keep your $10, but don't gain anything)
Expected Utility = $0
The expected utility of playing ($2.50) is higher than not playing ($0). There is more value in ‘doing the thing’, than there is in ‘not doing the thing’, so you should ‘do the thing’. To put it more formally, when the cost is more than the expected return, don't do it. When the cost is less, go for it. It's like deciding whether to cast your net based on how many fish you can see in the water.
But here's another thing: human behavior isn't always rational. We're not perfectly logical creatures, constantly making optimal decisions based on careful calculations of probabilities and payoffs. Imagining humans to be entirely objective, dispassionate, emotionless data processors that will consistently arrive at ideal solutions and outcomes, is quite irrational. I don’t know about you but living in the world populated solely by algorithmic decision-bots seems quite unappealing and dystopian to me. We're more like Jack with his magical fishing rod, often guided by hope, sentiment, and a slew of cognitive biases that can hijack our ability to evaluate scenarios critically.
But the ability to ‘err’ (whatever that may look like), and the tension between rationality and emotion are arguably the things that make us quintessentially human. It's the spark that ignites creativity, fuels passion, and sometimes leads us down paths less traveled. Consider the Wright brothers: if they had solely relied on the expected utility of their flying machine experiments, they might never have gotten off the ground. The rational calculation would have suggested the risk of failure (and physical harm) far outweighed the probability of success. Yet, their emotional drive – their hope, curiosity, and sheer determination – propelled them to keep trying until they achieved the seemingly impossible.
While the development of aviation was a cumulative effect, involving many separate inventors and engineers, the Wright brothers were instrumental. Wilbur and Orville arguably gave wings to human ambition.
At the same time, we can't discount the value of Bernoulli's insights. They provide a framework, a starting point from which we can assess our decisions. Like a skilled jazz musician who knows the rules of music theory but isn't afraid to improvise, we can use expected utility as a baseline, then layer our uniquely human qualities on top. This blend of rationality and emotion, of calculation and intuition, is what allows us to navigate the complex, often unpredictable waters of life. It's what helps us decide when to cast our net for the safe, sure catch, and when to chase the golden fish of our dreams.
Lotto: The Ultimate Fishing Expedition
Now, let's apply this logic to the lottery. All lottery-type games are based on the same fundamental principles, but let’s just take the Oz Lotto in Australia, for example. As at the time of writing this article, the cost to play is about $1.50, and the odds of winning the jackpot are roughly 1 in 62,000,000.
These odds sound astronomical, but allow me to allay your fears with some heartwarming news. You’re actually far more likely to be struck by lightning (1 in 1 million), being attacked by a shark (1 in 4 million), or die in a plane crash (1 in 30 million).
In the incredibly unlikely event that you do win the jackpot, you may have to share it with other people that also win. The minimum Oz Lotto jackpot is $3 million and the maximum recorded jackpot is $111 million. When this was won back in 2012 it was shared between 4 winners.
Although it varies from week to week, the average jackpot is around $11 million.
Even if we're generous and factor in all the smaller prizes, you're still looking at putting in $1.50 for an expected return of about 63 cents. It's like paying $1 so that you can get less than half back - not exactly a great economic strategy.
But here's the thing: people still play. A lot. Most serial Lotto enthusiasts probably don’t even really care that the statistical likelihood of them hitting the jackpot is so low. Try pointing out to someone playing the lottery that their expected utility is well below what they will be paying, and see if it has any effect at all on their behaviour. You can present them with this article, or point to the mountainous tomes of data that exist online decrying the economic prospects of playing lotto. It won’t make a difference.
So why do we keep casting our lines into this seemingly fruitless sea? Well, it turns out there are several powerful psychological factors at play, each acting like a different current pulling us towards the lottery counter.
The Allure of Near Misses
Ever noticed how getting four numbers right in lotto feels so much more exciting than getting none right? That's the near-miss effect in action. It's like almost catching that big fish – it gives you hope that next time, you'll reel it in for sure.
A 2009 study found that near misses activate the same reward systems in our brains as actual successes. It's as if our brains are saying, "You were so close! Just one more try and you'll get it!" This psychological quirk keeps us coming back for more, even when the rational part of our brain knows the odds haven't changed.
Big Numbers, Small Comprehension
Our brains evolved to understand the difference between being chased by 1 lion versus 7 lions. But 62 million? That's about as comprehensible as the number of grains of sand on a beach.
As Robert Williams, a professor of gambling studies, points out, we don't really 'get' big numbers. The difference between odds of 1 in 3 million and 1 in 200 million doesn't feel as vast as it actually is. It's like trying to visually distinguish between a school of 1000 fish and a school of 10,000 fish while standing on the shore – after a point, it all just looks like a lot of fish.
The Availability Heuristic: Spotting Whales, Ignoring Minnows
Remember the last time you heard about a huge lottery win on the news? Of course you do. But can you recall hearing about the millions who didn't win? Probably not.
This is the availability heuristic in action. We judge the likelihood of events based on how easily we can recall examples. It's like thinking shark attacks are common because they always make the news, even though you're more likely to be killed by an inanimate vending machine than a shark. Have you ever in your life seen the headline “Man doesn’t get bitten by shark”?
Lottery winners always make a splash in the media, while the vast ocean of non-winners remains invisible. This makes winning seem more possible than it really is, like thinking you'll easily catch a whale because you once saw one breach the surface.
The Gambler's Fallacy and the Illusion of Control
If you've been fishing in the same spot for hours without a bite, you might start to think, "I'm due for a big catch any minute now!" This is the gambler's fallacy at work – the mistaken belief that because something hasn't happened in a while, it's bound to happen soon.
In lotto, people often pick numbers based on how long it's been since they last came up, as if the numbered balls have a memory. This gives people a sense of control over an entirely random process. It's like thinking you can influence which fish swim into your net by wiggling your toes or wearing your lucky fishing hat.
The gambler's fallacy and the illusion of control are actually fascinating psychological phenomena that reveal much about human nature and our struggle to cope with uncertainty and randomness.
The Gambler's Fallacy:
This is essentially just the mistaken belief that if something happens more frequently than normal during a given period, it will happen less frequently in the future (or vice versa). It's a failure to understand true randomness. In reality, each event is independent, but our minds struggle to accept this, instead seeking patterns and meaning. For example, given that a coin is fair, it doesn’t matter if heads have come up last 7 times it has been thrown - the next toss is exactly as likely to be heads as it is to be tails.
The Illusion of Control:
This is the tendency for people to overestimate their ability to control events. It's particularly evident in situations where skill and chance are both involved, leading people to attribute outcomes to their actions rather than to luck. This is basically why some people choose to wear the same article of clothing each time they watch their favourite sporting team compete, believing that their own behaviour (of wearing the same shirt for example) has some deterministic power over the outcome of the sporting event.
Superstitions often arise as a way to create a sense of control in unpredictable situations. The act of wearing a "lucky" shirt while watching a sports game is a prime example. Logically, we know our clothing choice has no impact on the game's outcome, but it gives us a comforting sense of participation and influence.
Why We Cling to These Ideas:
1. Cognitive Comfort: Believing we have some control, even if illusory, reduces anxiety and stress in uncertain situations.
2. Pattern Recognition: Our brains are wired to find patterns, even where none exist. This ability, while crucial for learning and survival, can lead us astray in truly random scenarios.
3. Desire for Agency: Humans have a fundamental need to feel that their actions matter and can influence outcomes.
4. Coping Mechanism: Superstitions and illusions of control can be ways of managing fear and uncertainty, giving us a sense of predictability in an unpredictable world.
5. Reinforcement: Occasional coincidences between our superstitious behaviors and desired outcomes can strongly reinforce these beliefs.
6. Evolutionary Advantage: Some argue that a tendency to see patterns and assume control, even when false, might have provided survival advantages to our ancestors.
The Difficulty of Accepting Randomness:
It's cognitively challenging and emotionally unsettling to accept that many aspects of life are beyond our control. This realization can lead to feelings of helplessness or existential anxiety. Our desire for control is deeply ingrained, possibly as an evolutionary adaptation that motivated our ancestors to actively shape their environment rather than passively accept their circumstances.
However, the illusion of control can be both a blessing and a curse. While it can provide comfort and motivation, it can also lead to unwarranted risk-taking (as in gambling) or unnecessary stress when we fail to influence truly random outcomes.
While it's important to recognize areas where we do have genuine influence, it's equally crucial to develop the mental flexibility to accept uncertainty and randomness where they exist. This balanced perspective can lead to better decision-making and a healthier psychological approach to life's unpredictabilities.
The Sunk Cost Fallacy: Throwing Good Money After Bad
Imagine you've been fishing all day without a single bite. You're tired, sunburnt, and your bait is running low. But you think, "I've already invested so much time and money, I can't give up now!" That's the sunk cost fallacy in action.
In lotto, people often continue playing simply because they've already invested so much. They think, "I've been playing these numbers for years. If I stop now and they come up next week, I'll never forgive myself!" It's like continuing to fish in an empty pond because you've already paid for the fishing permit.
The Entertainment Factor: Fishing for Dreams
This is a big one. For some people, buying a lottery ticket is simply an impulse buy, and sometimes the purchase isn't about the rational expectation of winning. It's about buying a dream, a few days of "what if" fantasies. What some people are buying is permission to fantasise about a life of unrestricted opulence and unencumbered decadence It's like going fishing not for the fish, but for the peaceful day by the water and the stories you'll tell later.
For less than the cost of a cup of coffee, you can spend hours/days imagining what you'd do with millions of dollars. It's a form of cheap entertainment, a momentary escape from the everyday grind. And for some, that alone is worth the price of a ticket.
The lottery ticket as entertainment is a fascinating concept because it offers a unique blend of hope, fantasy, and potential life-changing outcomes, all for a relatively small investment. Beyond affording people an opportunity to fantasise, there are several other reasons for purchasing a lottery ticket:
1. Conversation Starter: Lottery dreams often become a social activity. People discuss their plans with friends and family, sharing laughs and bonding over shared fantasies.
2. Escapism: For many, especially those facing financial hardships, a lottery ticket offers a temporary mental escape from daily stresses and worries.
3. Anticipation and Excitement: The build-up to the draw creates a sense of suspense and excitement, similar to watching a thrilling sports match or a suspenseful movie.
4. Potential for Storytelling: Even if you don't win, the experience of playing becomes a story in itself - "Remember that time we almost won the lottery?"
Let's compare buying a lottery ticket to going to a movie theater:
1. Cost:
o Movie ticket: $10-$15 for about 2 hours of entertainment
o Lottery ticket: $2-$5 for potentially days of daydreaming and anticipation
2. Experience:
o Movie: Immersion in a fictional world, escapism
o Lottery: Immersion in personal fantasies, escapism
3. Social Aspect:
o Movie: Shared experience with friends/family in the theater
o Lottery: Shared dreams and discussions with friends/family
4. Anticipation:
o Movie: Excitement building up to the release date
o Lottery: Excitement building up to the draw date
5. Outcome:
o Movie: Guaranteed entertainment for the duration, possibly memorable scenes
o Lottery: No guaranteed tangible outcome, but memorable fantasies and a tiny chance of life-changing win
6. Replay Value:
o Movie: Can be rewatched, but the initial experience is unique
o Lottery: Can be played repeatedly, each time potentially sparking new fantasies
While a movie offers a predefined story for you to experience, a lottery ticket allows you to be the author of your own fantasy, albeit with very long odds of it coming true. Both provide entertainment value, but the lottery uniquely combines entertainment with the tantalizing possibility, however remote, of a real-life happy ending.
Casting Nets or Chasing Golden Fish?
As we navigate the choppy waters of chance and probability, it's important to remember that while the allure of the golden fish (or the multi-million dollar jackpot) is strong, there's value in the everyday catches we often overlook.
Which brings us back to Jack, our fisherman friend from the beginning of our tale.
Months had passed since Jack traded his net for the magical rod. His family was hungry, his boat was in disrepair, and still, he cast his line day after day, chasing the elusive golden fish.
One stormy evening, as Jack was about to cast his line once more, he noticed an old woman struggling to carry her groceries along the rain-slicked pier. Despite his obsession with the golden fish, a flicker of his old self compelled him to help her.
As he carried her bags, the old woman asked about his fishing. Jack poured out his story – the magical rod, the golden fish, his dwindling fortunes. The old woman listened patiently, then said, "You know, sometimes the real treasure isn't at the end of a magical fishing line. It's in the everyday kindnesses, the small joys, the connections we make. These are the true golden scales of life."
The next day, Jack traded the magical rod for his old net. He returned to catching regular fish, appreciating each one. He helped his neighbours, spent time with his family, and found joy in the simple act of casting his net and seeing what the day would bring.
Jack never caught the golden fish, but in rediscovering the value of his everyday life, he found something far more precious – contentment.
Like Jack, we all have a choice. We can spend our lives chasing golden fish, always hoping for that one miraculous catch that will change everything. Or we can appreciate the school of opportunities swimming all around us every day, casting our nets wide to catch not just fish, but moments of joy, connection, and purpose.
The lottery, like the golden fish, will always be there, tempting us with its glittering promise. And there's no harm in casting a line now and then, dreaming of what could be. But remember, the real richness of life isn't found in a single enormous windfall, but in the accumulation of small, everyday treasures.
So by all means, buy a lottery ticket if you enjoy the thrill. But don't neglect the golden scales of everyday life in pursuit of an elusive jackpot. After all, true wealth isn't just about the size of your catch, but about appreciating the entire ocean of experiences life has to offer.
The TL;DR here is this:
-Statistically, playing the lottery has a negative expected value.
-There are a number of psychological factors driving lottery play (near miss effect, difficulty comprehending large numbers, the availability heuristic, the gambler's fallacy, illusion of control, sunk cost fallacy)
-Lottery tickets provide cheap entertainment through fantasies and social interactions.
-While understanding probabilities is important, human decision-making involves both logic and emotion.
While occasional lottery play for entertainment is harmless, there is certainly value in focusing on and appreciating the "golden scales of everyday life" rather than neglecting them in pursuit of an elusive jackpot.
Although I don’t imagine they had the idea of playing the lottery specifically in mind when they penned the poignant lyrics to their 1994 hit “Waterfalls”, the immortal advice offered by TLC comes to mind here:
“Don’t go chasing waterfalls, please stick to the rivers and lakes that you’re used to”
-TLC